AUto insurance - frequently asked questions

Q: Is auto insurance required?

A: Yes. Having auto insurance is a legal requirement if you are driving a motor vehicle on public roadways. Additionally, if you are financing the vehicle , you are required to carry an insurance policy that includes comprehensive and collision coverage in addition to the state's Minimum Liability Requirements described below.  

• $15,000 for injury/death to one person.
• $30,000 for injury/death to more than one person.
• $5,000 for damage to property.

Q: Is damage or theft of my vehicle covered by the state's Minimum Liability Insurance?

A: No. The legal minimum insurance requirement only covers other people's injuries and their property. Your vehicle has no coverage in the event it is stolen and/or  damaged in any occurrence where it has been determined that you are 'at fault'.  

Q: Is additional insurance coverage required if the vehicle is financed?

A: Absolutely. If you are financing your vehicle, the lender you are financing the vehicle is the lien holder and technically, owns the vehicle. As a result, if you have a loan for your vehicle, the finance company will REQUIRE you to have proof of Comprehensive and Collision insurance that covers the vehicle itself and protect the finance company's asset which is your car.  Additionally, your finance company can require deductibles for repairs or replacement of your be no more than a certain dollar amount. The maximum deductible allowed by Orca Funding is $1000.  

Q: What happens if my auto insurance lapses and I still have a loan on the vehicle?

Nothing good. This is a serious matter for you and your finance company. For  the finance company, their asset (your car) is completely unprotected and exposes the company to significant loss in the event the vehicle is damaged, totaled or stolen and not recovered. .  For the borrower and registered owner of the car,  you will have violated the terms of the contract you signed when you purchased the vehicle and you will also be unlawfully on public roadways. In the event that the vehicle is deemed a total loss for whatever reason, the borrower is still liable for any outstanding loan amount owed to the finance company and failure to fulfill the obligations of  the loan terms will result in significant damage to the borrowers credit profile. Additionally, the borrower will be subject to any legal action the lender may choose to engage in for the purposes of mitigating any financial loss incurred.

To avoid potential loss, the terms of your contract with the lender dictate that the finance company has the right to 'Force-Place' insurance on your vehicle and add the premium to your existing auto loan payment. You agreed to the lender having the right to do so when you signed the sales contract for your vehicle. Orca Funding strongly advises that you maintain your own auto insurance as 'Forced-Placed' insurance is more costly than insurance borrowers can find on their own in the consumer market place and can potentially place a significant burden on the borrower's household budget.

Q: Will my insurance policy cover the entire outstanding balance of my loan if the car is totaled?

A: Maybe. It depends on a variety of factors such as the value of the make and model of your car, your loan balance relative to whatever the value is determined to be and your insurance company and/or policy itself. Given the uncertainty created by any and all of these factors, Orca Funding advises that you discuss with your  dealer the purchase of a Guaranteed Asset Policy,  otherwise known as a GAP policy. A GAP policy come into effect when an insurance settlement is less than the amount owed on your vehicle. The GAP policy covers the difference so your loan balance is satisfied and you avoid paying for a car you no longer can drive. Additionally, the cost of GAP policies can typically be added to your vehicle loan. Without a GAP policy, you would be responsible for any difference between the insurance settlement and the loan balance.  

For more information about California's Minimum Liability Insurance requirements click the link below

www.dmv.ca.gov/portal/dmv/detail/pubs/brochures/fast_facts/ffvr18